Israeli firms exporting more to Asia

“If the trends continue, it will signify a structural change in Israel’s export target destinations due to the global crisis"

September 27, 2010 22:53
2 minute read.
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Zim Ship 311. (photo credit: Courtesy)


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Israeli exporters have successfully managed to adjust to changes in world trade shown in a switch in trade areas in recent months, moving away from Europe and more towards Asia.

“The composition of Israel’s exports adjusted successfully to the change in the composition of world trade. This reflects the relative flexibility of Israel’s exporters to world developments,” according to a central bank report on the composition of Israel’s goods exports by geographical destination published this week.

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'Europe crisis likely to harm Israel’s competitiveness'
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“Recently Israel’s exposure to Asia and the other markets has risen, expressed in a rise in the relative exposure index. In other words, the share of Asia in Israel’s exports has risen faster than has the share of Asia’s imports in total world imports.”

The composition of Israel’s exports by trading area destination has changed recently in parallel to a change in the composition of world trade as the share of Asia and the emerging market economies (East Europe, South and Central America, and others) increased at the expense of the share of imports into Europe and the US.

“The rapid recovery in Asia compared with the moderate recovery of demand in the advanced economies and expectations of another crisis in Europe made it worthwhile to penetrate into the markets in the East.

“This contrasts with the situation in the last few years when although demand from Asia increased faster than from Europe and the US, the composition of Israel’s exports changed in line with the geographical composition of world imports,” stated the report.

“The global crisis in 2008 and concern over another crisis in Europe cast doubts over the growth of the advanced economies, and against this background, the situation in the last few months may in fact reflect a switch in trade from Europe to Asia.”

In the last few years Israel’s main export destinations have been the EU with a share of 33 percent, the US with 28%, and Asia with 15%. The report found that since the beginning of 2008 a downward trend has been evident in Europe’s share of Israel’s exports and from the second quarter of 2009, the share of Israel’s exports destined for Asia began an upward trend, after many years when that share had remained steady at about 15%.

“Israel’s exports were found to be over-exposed to Europe, and under-exposed to Asian countries,” according to the report.

“In addition, an examination of the indices over time shows a marked increase in the exposure of Israel’s exports to the US as a result of the very rapid growth of exports of pharmaceuticals and computer processors to the US.”

However, when excluding the effect of pharmaceuticals and computer processors on the development of Israel’s exposure to trading areas, the study showed that Israeli exporters acted swiftly to changes in world trade.

“It is too early to determine whether the increase in the relative share of Asia in Israel’s exports really reflects a diversion of trade; time will tell whether the increase is a permanent one,” stated the report.

“If the above trends continue, it will signify that trade has been diverted, deriving from a structural change in Israel’s export target destinations made possible recently due to the global crisis and the resulting developments.”

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